How to Know If You Can Really Write Off That Donation

Your charitable giving can benefit you, too, if you take a charitable contribution deduction. By claiming charitable donations as tax deductions on Form 1040, Schedule A, Itemized Deductions, instead of claiming the standard deduction, you could even lower your taxable income.

The IRS website has a tool to help you calculate your standard deduction. Use either the standard deduction amount or the total itemized deductions, whichever results in the lower amount of tax you’d owe.

Qualifying Organizations for Charitable Tax Deductions

Donations are eligible for tax write-offs only if you make them to qualified organizations. “An organization has to have received the 501(c)(3) designation from the IRS for it to qualify as a ‘charitable organization’ in terms of deduction donations for tax purposes,” said accountant Eric Nisall, founder of AccountLancer, which provides accounting, tax and consulting services for freelancers. “That means your neighbor’s kid’s Little League team selling raffle tickets isn’t a tax write-off unless the team holds that certification.”

Generally, charitable gifts to these types of types of tax-exempt organizations are tax-deductible donations:

Dues, fees or bills you paid to country clubs, lodges, fraternal orders or similar groups

Tuition

Value of your time or services for volunteering

Value of blood given to a blood bank

“It’s worth noting that donations to political action committees and groups designated as 501(c)(4) nonprofit organizations are not tax-deductible,” said Kay Bell, author and tax journalist for the blog Don’t Mess With Taxes.

How to Write Off Donations

Before taking a tax write-off for donations, verify the status of the organizations to which you donated. The IRS website has a tool that allows you to search qualifying organizations by name, location and employer identification number.

How to Deduct Cash Donations

One common error taxpayers make is claiming the full amount of a donation to a charitable organization from which they receive a tangible benefit.

“Let’s say you went to a silent auction and won a prize that was valued at $1,000, but your winning bid — and therefore your donation — was only $500. You can’t claim a tax deduction because you came out ahead $500,” said Nisall.

“But if you went to a charity dinner and paid $1,000 per plate and the meal was valued at only $500, you get to deduct the difference because you actually paid more than the value you received in exchange for your ‘gift,'” he said.

The total amount of your donations is limited to 20, 30 or 50 percent of your adjusted gross income, depending on the type of organization. In addition, the total amount of your itemized deductions might be limited.

“Cash donations, which, according to the IRS, include gifts made via credit cards and even text messages, are claimed on Schedule A in the section handily identified as ‘Gifts to Charity,'” said Bell. “You just enter the amount you donated. If each gift was less than $250, that’s it.”

“If you’re more generous, however, you’ll need to be sure you get an official acknowledgment document from the charity,” she said. “In fact, you need to get receipts from all nonprofits to which you give. You don’t have to send them with your taxes, but if you don’t have documentation and the IRS questions your charitable deduction, it can automatically deny it,” said Bell.

How to Deduct Noncash Contributions

Instead of money, you might want to donate other items, such as anything from used clothing to real estate. To claim an itemized deduction, write the total value of your donations on Form 1040, Schedule A, Line 17. You’ll need separate acknowledgments for each $250 donation or one showing your total charitable contributions to the same organization. Other requirements apply if your donation is worth more than $250.

You can claim only the “fair market value” of each item. According to the IRS, fair market value is the “price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.” The IRS doesn’t provide a formula for value determination, so you should consider all of the items’ factors, including desirability and scarcity.

How to Deduct Vehicle Donations

Donating your old set of wheels to a charity can be a bit tricky, but if you do it correctly, you can write it off. For a car worth more than $500, the amount you can deduct is generally the lower of either how much the organization resells it for or its fair market value on the donation date. Pricing guides like Kelley Blue Book might serve as good estimate tools.

Different rules apply to cars worth more than $500. For these donations, you must attach Form 1098-C to your Form 1040. Fewer requirements apply if you donate a car worth less than $500.

Keep Your Records for Tax Write-Offs

It’s critical to keep each tax receipt proving you made charitable donations for tax deductions. If you give cash, keep the canceled check, credit card statement or payroll deduction documentation to prove you donated by credit card, check or otherwise. For donations over $250, make sure you get an acknowledgment from the organization with all the pertinent information.

The record-keeping requirements for noncash tax-deductible donations depend on the value of the item and are increasingly stringent depending on the value and type of item. “You might want to take pictures of [noncash] items donated so you can substantiate the quality and condition of them,” said Nisall.

“If you don’t have records to satisfy any IRS auditor questions about your donations, you can lose your deduction,” said Bell. “When Congress toughened the donation documentation laws in 2007, it gave the IRS the ability to automatically disallow undocumented donations. Remember, in all IRS transactions, the burden of proof is on you, the taxpayer. So get your receipts just in case you ever need them.”

Super helpful! Can be so confusing to know what is deductible and to get accountants to walk you through the process if you don’t know the basics. The property more than $250 is really key.

Ernest latchman

I am in the process buying a one family home in the bronx zip code 10472 the asking price is 375.000 down payment is 20k my app.monthly mortgage will be app.2400dollars per month .what are the yearly deduction that I could claim on my tax return my yearly gross pay 75000dollars my avergage credit is 675.i will be using my Icome only because my wife is unemployed

Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). These offers do not represent all financial or credit offers available.